The UK faces a “period of destitution” in which families “can’t put shoes on” children, the government’s former homelessness adviser has warned.
The government has promised to pay two-thirds of wages from 1 November for workers at firms forced to close under tougher Covid restrictions.
But Dame Louise Casey said this reduced level of support would not “cut it”.
She told the BBC many “normal people, trying to get on in normal lives” risked falling into poverty.
The Treasury said its “priority” was to protect jobs and incomes and it had made “our welfare system more generous”.
The furlough scheme – under which the government and firms are together paying up to 80% of people’s wages, to a maximum of £2,500 a month – ends on 31 October.
Under its replacement, the job support scheme, those in “viable jobs” able to work at least one-third of their hours will get 77% of their pay, with the government contribution capped at £697.92 per month.
Employees at UK firms ordered to close completely will get 67% of wages of their usual salary paid – up to a maximum of £2,100 a month.
Dame Louise told BBC political editor Laura Kuenssberg this was “not going to be good enough”.
She said: “It’s like you’re saying to people, ‘You can only afford two-thirds of your rent, you can only afford two-thirds of the food that you need to put on the table.’
“There’s this sense from Downing Street and from Westminster that people will make do. Well, they weren’t coping before Covid.”
In England, so far only Liverpool has been placed in the highest Tier 3 restrictions, under which pubs and bars not serving meals will be closed.
But other areas, particularly in northern England, could soon follow if Covid infection rates continue to rise sharply.
Pubs and restaurants across central Scotland have also been closed until 25 October.
“We are looking at a period of destitution,” said Dame Louise.
“I can’t impress upon you enough that I think we are heading into an unprecedented period. We’re already in it and it’s going to get worse. And it needs a more cross-government cross-society response.”
“Do we want to go back to the days where people can’t put shoes on the children’s feet?” she added.
“Are we actually asking people in places like Liverpool to go out and prostitute themselves, so that they could put food on the table?”
Dame Louise also questioned Chancellor Rishi Sunak for saying that those on the lowest wages could also claim Universal Credit to “compensate for a good chunk” of lost earnings.
She said it was “unprecedented for a Conservative chancellor to say ‘well, don’t worry, go on to Universal Credit'”.
“That’s not necessarily what you’d expect from a Conservative chancellor, who should be about jobs and about keeping people in employment.”
The standard monthly Universal Credit allowance for a couple in which at least one partner is aged 25 or above is £594.04.
The extra amount for a first child is a maximum of £281.25, while it is £235.83 for other children.
The government has added £20 a week to Universal Credit payments, but this is due to end in April.
Dame Louise called the plight of many working people “unprecedented”, adding: “I have never worked in a situation where I’m so concerned about what’s going to happen.”
“We need an unprecedented spending review that is generous and kind and [it] needs to make sure that we don’t have hungry children,” she said.
Louise Casey has a reputation for getting things done.
That’s why successive governments, including this one, have brought her into the fold – not to make them feel good, but to tell the truth about what needs to happen to achieve their aims.
That’s why her warning today could be hard for the government to ignore.
Since the pandemic struck, the Treasury has racked up generationally massive bills to support businesses and families through the crisis.
But as we enter the grim challenge of the second wave, that support, while still huge, is dwindling.
For Dame Louise, that risks pulling out vital support for families at the very moment when it is needed most.
Her verdict is haunting. With millions more people facing tighter restrictions, her fear is that could mean real destitution for countless families.
A Treasury spokesman said: “Our priority since the start of this outbreak has been to protect as many jobs and incomes as possible – and that will continue as we go through the difficult months ahead.
“The expanded Job Support Scheme is one element of our unprecedented package of support and its generosity is in line with similar schemes provided by European counterparts.”
The government has “invested more than £9bn in making our welfare system more generous”, with increases both in Universal Credit and local housing allowance, the spokesman said.
“This has made the system more responsive to people’s needs, with the lowest-paid in society seeing an increase in the support they receive.”
But Labour said the chancellor had “abandoned workers and families in parts of the country under local restrictions” and “must think again”.
Shadow chief secretary to the Treasury Bridget Phillipson added: “People shouldn’t have to worry about meeting their rent, paying the bills or putting food on the table because the government has lost control of virus.”
Earlier this year, Prime Minister Boris Johnson appointed Dame Louise to head up the review into homelessness, saying he was “absolutely determined to end rough sleeping once and for all”.
But when the pandemic hit, Dame Louise instead became the head of the government’s homeless Covid taskforce, organising emergency housing for almost 15,000 rough sleepers during lockdown.
She stepped back from the role in August.